Home > Uncategorized > Guest post: the foreclosure vote

Guest post: the foreclosure vote

November 14, 2016

This is a guest post by Tom Adams, who spent over 20 years in the securitization business and now works as an attorney and consultant and expert witness on MBS, CDO and securitization related issues.

I don’t expect anyone to really come up with the perfect explanation for why Clinton lost and Trump won the presidential election.  But I do spend some time looking at these maps:

realtytracforeclosure

screen-shot-2016-11-14-at-6-34-06-am

The first map is from RealtyTrac, and indicates the states with the largest foreclosure inventory in 2012. The second is a map of the key battleground states. In 2008 and 2012, Obama won these states. In 2016 Clinton lost them. There’s a lot of similarities between those two maps.

Even in the best economic environment, residential mortgage foreclosure is a long, messy process. The massive wave of foreclosures that hit these regions after the financial crisis had enormous consequences economically. They also had a tremendous, painful impact on the families and neighborhoods of the people affected, directly and indirectly by the foreclosures.

A rise in the number of suicides have been tide to the wave of foreclosures. Large swaths of neighborhoods were plagued by falling property values, blighted abandoned homes and a sense of uncertainty and, perhaps, doom. I often think about the effect the foreclosure crisis had on the children of affected families and the impact of children watching families, neighbors and classmates going through the painful process.

I was involved, to a small degree, with homeowners, activists and lawmakers that tried to deal with the issues and problems in the foreclosure crisis, some of which is documented in David Dayen’s excellent new book, “Chain of Title“. As Dayen documents, the government response to the issues was ultimately terribly unsatisfying and at best, had the effect of sweeping the issue under the carpet.

The consequences of the government’s response played out in this presidential election.

Clinton was aware of the problems caused by the wave of foreclosures: last fall the NY Times reported that the campaign was frustrated that the crisis had displaced so many homeowners that their database of voters was disrupted. Perhaps this is why the campaign’s get out the vote efforts in Michigan, Wisconsin, Minnesota and other states were much less effective than the campaign had hoped for. Some reports were that up to [25%] of the voters the campaign contacted were actually Republicans or potential Trump voters. In fairness, Clinton was probably concerned about the economic plight of affected homeowners and communities than she was about the technological issues it caused, but that was hardly the dominant campaign message.

How much of an impact would a compassionate outreach have had on these neighborhoods? It’s also worth remembering that the people hit by the foreclosure crisis were generally middle class – prior to the crisis they owned homes, held jobs, were members of the community. Where were they by the time the 2016 election came around?

Certainly, it’s a complicated issue and made more complicated by the fact that the Obama Administration didn’t cover themselves in accolades during the mess. But what if she had said something like this while campaigning in the battleground states:

“While I appreciate the efforts of the Obama administration to address the foreclosure crisis, the Home Affordable Modification Program simply has not provided the relief needed by many families. That is why I strongly support the creation of an Office of the Homeowner Advocate to help struggling families who have been wrongly denied assistance, or who have had difficulties navigating the extremely stressful system of avoiding foreclosure. The Office of the Homeowner Advocate will not only give Vermonters a strong voice in the process, but it will identify ways to make the HAMP program work better,”

That, unfortunately is a statement from Bernie Sanders, in 2010, rather from Clinton (Sanders continued to make it a focus of his primary efforts in 2016 as well).

Or perhaps Clinton could have spoken out in support of the frustrated community groups that sought to participate in the HUD auctions of distressed loans, only to lose out time and again to hedge funds, many of which were run by bankers who were directly involved in the financial crisis.

Maybe she was reluctant to get too involved in the issue because she tried to talk about it back in the 2008 primary and ended up being tagged as a too close to Wall Street. On several occasions in foreclosure states like Nevada, she seemed to cede the issue of the financial crisis  to Sanders and focused her efforts on minority outreach instead. But in states like Florida, where many homeowners remained underwater on the value of the homes and mortgages still in 2016, the issue appeared to still be on the minds of voters on the eve of the election.

Of course, it’s easy to second guess the campaign now. I, and many others, spend hours over several years trying to get the Obama Administration or state governments to improve their response to the foreclosure crisis. By 2016, many of the people I worked with back in 2011 to 2013 on housing issues were exhausted and frustrated. I can only imagine how the people living with the foreclosure crisis must have felt.

Still, a few thousand votes in three key states would have been enough to change the outcome of the election. And when you compare these maps, it’s hard not to see the lost opportunities.

Categories: Uncategorized
  1. November 14, 2016 at 6:27 am

    Where is the second map?

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  2. November 14, 2016 at 6:39 am

    I’m curious about the author’s take on the recent excitement about FRE/FNM re-privatization.

    FWIW, even as a finance guy, my impression is that there’s no justification for the government to gift private investors with a windfall in this situation. Also, I have serious doubts about how that could possibly help the housing/mortgage market. On the other hand, this seems to be something a lot of people in Trump’s circle favor.

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    • Josh
      November 14, 2016 at 11:55 am

      Tom can reply better than I can on the substance. But clearly we need to be transferring money from the takers to the makers by any means possible.

      Doubtful that Trump’s backers (those who voted from him) would support this but may well be true that Trump’s Circle (those with influence his agenda) do.

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  3. November 14, 2016 at 7:36 am

    I guess that the scale for graph 1 is logarithmic (!)

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    • perpetualWAR
      November 16, 2016 at 11:12 am

      They haven’t “come around”!!!

      Liked by 1 person

      • November 18, 2016 at 10:16 am

        Elaborate.

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  4. Josh
    November 14, 2016 at 10:56 am

    There clearly are many factors and this may be one. But the similarity between the maps is in the eye of the beholder. California and Arizona which were very badly hurt moved toward Clinton (v Obama) and others (e.g. Florida) didn’t move more than the country as a whole. I don’t have time to do a more careful analysis but I suspect other factors were more important.

    I do agree that it would have been better if we had a Democratic candidate who addressed these issues.

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    • acharn
      November 17, 2016 at 5:32 am

      My memory is that the foreclosure fraud crisis hadn’t really gotten rolling in 2008, so would not have affected the primary between Clinton and Obama (much). It was in 2009 that the number of foreclosures went over 3,000,000. In 2010 the forged documents and MERS became matters of public knowledge.

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  5. November 14, 2016 at 8:01 pm

    good insight.

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  6. November 14, 2016 at 11:34 pm

    I actually don’t see any relation between the two maps at all. Perhaps if that correlation was better explicated.

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  7. Chas Simmons
    November 15, 2016 at 1:33 pm

    The foreclosures were not only terrible for the people involved, but were very hard on the economy. Housing construction is the main engine that pulls us out of economic slumps, and there were several forces that held back recovery of construction during the Lesser Depression (as the cognoscenti call the years after the Panic of 2008), but the one most easily affected by the government was the large inventory of houses being sold following foreclosure. But Obama was too conservative and too accommodating to the Republicans to call for more than a token effort at relief.

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    • perpetualWAR
      November 16, 2016 at 11:15 am

      Obama was accommodating the banking crooks, not the Republicans. Let’s make that very clear. He hired Geithner who claimed HAMP would “foam the runway” to allow the BANKS an easy landing.

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  8. perpetualWAR
    November 16, 2016 at 11:11 am

    I am one of those foreclosure victims who actively addressed this issue non-stop in my state legislature. At the time of the crisis, the legislature was completely Democratic with a Democrat Governor. My continued pleas to change the laws to protect not only the homeowners from unlawful foreclosures but also the land records from these forged documents fell on deaf ears. It exhausted me to try to make the legislators do the right thing. I even had a meeting with the top Representative who was passing a ineffective mediation program bill, and told her that the modifications being put forward would eventually lead to foreclosure down the road due to unrealistic balloon payments. The legislator agreed and said, “Oh, yeah, I know.” I was stunned. She knew that the bill was an ineffective band-aide covering a hemmorage? WTF? Anyway, I watched as this fully Democrat state legislature slowly turned Republican. The Democrats lost the Senate and now are very close to losing the House. And the Democrats are still clueless as to why this phenom is happening. Maybe it’s because the Chairman of the House Judiciary shut down public comment when 10 homeowners showed up in opposition to a bank-friendly bill last session? Or maybe it was because after much struggle to get 2 homeowner-friendly bills passed, the Senate allowed the bankers to kill both of them on the Senate floor???

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    • Noja
      November 17, 2016 at 5:11 am

      Sorry (too banal a word) to hear of your experience. It tallies with our experience in London of trying to influence the totally destructive planning policies of a virtually 100% Left Leaning Labour Local Council. Tone deaf doesn’t describe it, corrupt might.

      There is a great book by Peter Marris, who unfortunately died in 2007, called the Politics of Uncertainty. The book was published in 1996, but pretty much describes exactly what happened to the US housing market in 2008.

      The book is about how the risk of uncertainty is increasingly shifted (strategically) from society / community to the individual. How economic risk and the risk of natural disaster were shifted from mortgage companies / insurances / to the individual home owner. Marris puts developments in a larger sociological context, to which we were / are all participants.
      The struggle for Obamacare can also be read in the context as an attempt to reverse the trend and shift individual risk onto the community at large. The resistance to Obamacare is a barometer of the extent of resistant / unwillingness to reverse the trend.

      Which, of course, is unsurprising given the powerful myth of individualism pervading every section of American society.

      The final, painful irony is, that American’s seem to have just elected a property developer as President. Someone who by definition and in practical reality has benefited from the property crises in the US. You go figure:(

      https://www.goodreads.com/book/show/16749811-politics-of-uncertainty

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  9. Josh
    November 30, 2016 at 11:31 pm

    Foreclosed homeowners not likely to be cheered by Trump’s pick for Treasury Sec.
    http://www.npr.org/2016/11/29/503755613/trumps-potential-treasury-secretary-headed-a-foreclosure-machine

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